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Home , Catholic theology

God and Mammon:

Examining the ’s Influence

On Macroeconomic Growth Rates

Under the Influence of Liberation

Michael Carter

Economics 47960

Dr. Joseph Kaboski

March 25, 2011 Carter 2

Liberation Theology was a movement in the 1970’s within the in America that sought to end poverty through political efforts in order to achieve material “liberation.” This movement was based upon the views of the Catholic Church and was supported by members of many levels of the Church hierarchy, including the , priests, and . Viewing this period as a natural experiment examining religious influence on the , this paper seeks to find a relationship between Catholicism and macroeconomic growth and to see whether the Church is able to do anything to support growth around the world. The initial conclusions are that the Catholicism positively affects macroeconomic growth unless it operates with the Liberation Theological point of view. Changes in economic teaching by religious bodies seem to have some effect on development.

Introduction Liberation Theology was a political movement within the Catholic Church in Latin

America that peaked from 1969-1979. Because the views of Liberation Theology were notably more politically charged than normal Catholic views, Latin America in the 1970’s serves as a useful natural experiment that examines the relationship between religion and the economy. The results of regression analyses indicate that Catholicism affects the economy positively in most cases. Further, the data suggest that a change in religious teaching causes a change in religion’s influence, which strengthens the position that religion can affect the economy. This paper begins with a review of existing literature on the topic of the economics of religion. It also contains a review of the Church’s introspective view on how she sees her role in shaping macroeconomic trends. The second section describes the data used in the analysis of this topic. The third section describes the methodology used in finding the relationships between Catholicism and growth.

The final section focuses on analysis of the findings and looks at implications of the results.

Literature Review The literature review is broken down into four distinct sections: economic research on the effects of religion; Church teaching on the relationship between economics and theology;

Liberation Theology; and this paper’s hypothesis based on the existing research. Carter 3

1. Economic Research

Most previous studies focused on the economic effects of religion in general, specific practices such as prayer or Church attendance, or belief in an afterlife. In papers that analyze

Catholic , the focus tends to be on the Church’s belief that works are necessary part of the road to rather than on the particulars of . This is important because Catholic Social Teaching contains the Church’s teachings on the economy.

Unfortunately, economic literature largely ignored the teachings and the effects of Catholic

Social Teaching. However, some groundwork exists that can establish religion’s effects in the economic world.

Barro and McCleary’s paper analyzes the relationship between religiosity and economic trends in various countries. The data range from the early 1980’s until the early 2000’s. The key factors analyzed include Church attendance, belief in , belief in hell, and other self- reported statistics regarding belief and religiosity. They concluded that individuals’ beliefs influence their economic outcomes.1 Belief in hell is most highly correlated with economic success, while belief in heaven is less correlated with, but still positively related to, productivity.

The authors believe that this correlation exists because people are more likely to work hard on earth if there is an expectation of punishment in the future. Similarly, people who believe in heaven are more highly motivated to work because there is the possibility of a reward after death. Interestingly, this fits perfectly into the theory of diminishing marginal utility. People would rather work harder to avoid a negative outcome (an of punishment) than they would to gain an equivalently sized positive outcome (an eternity of paradise). Holding various belief levels constant, the authors found that an increase in Church attendance corresponded with

1 Barro & McCleary (2006) Carter 4 lower productivity. This research clearly suggests that a ’s religiosity and beliefs can influence their individual economic outcomes. This opens the door to questions about whether other religious beliefs can affect the economy on a macro level rather than just on a micro level.

Many critics believe that the Catholic Church is in fact bad for growth and development, citing Max Weber’s book on the “Protestant Work Ethic.” The hypothesis of the Protestant work ethic claims that Calvinists work harder than other religious denominations, so countries that are more Calvinist are prone to grow more quickly than Catholic or Muslim countries. Calvinists believed in , which meant that they believed that their actions did not affect their possibility of getting into heaven. Those who believe in predestination believe that already chose who will go to heaven, and they look for signs that the have been chosen. One of these signs is material success, so they would work harder in order to be blessed with the sign of predestination. Weber wrote this book in 1905, so it lacks the advanced econometric analysis that modern economists can utilize. Weber bases most of his claims not on elaborate modeling but on prevailing religious attitudes from his time. Although he originally wrote the book as a sociological piece, many, even today, regard it as economic fact. Recently, some economists turned to available data to try to understand whether or not there are economic signs of the

Protestant work ethic.

Sascha Becker and Ludger Woessmann argue that the Protestant work ethic is not something that is inherently Protestant. Rather, they believe that influences human capital, particularly through education. Because Protestantism promotes individual reading and interpreting of the , it is associated with increased literacy rates. Using literacy rates, a measure of Protestantism, and tax records, they constructed a model that demonstrated that literacy was correlated with Protestantism. They also found that higher literacy rates were Carter 5 associated with higher taxes collected, so the authors concluded that literacy, not Protestantism, is beneficial for the economy.2 Their conclusion is that Protestant economies are not stronger because of a particular work ethic but because they put a larger emphasis on education.

While a human capital model may work in some countries, it does not offer an explanation that works in the developed world. If the human capital idea is true, then it should break down as education becomes more universally prevalent in a society. Benito Arruñada suggests that a Protestant social ethic, not a Protestant work ethic caused the growth perceived in

Protestant countries during the industrial revolution. Using survey data from around the world, he found that the number of hours worked and salary did not differ extremely between Catholic and Protestant respondents.3 He found, however, evidence that suggests that Catholics have a different social ethic than Protestants do. He thinks that Catholics tend to be more morally relativistic than their Protestant brethren are. This moral relativism means that they treat close relations better than they treat strangers. In the world of business, preferential treatment for close friends or family over potentially more qualified parties means that there is less fair and free competition which creates a weaker overall economy. Arruñada provides a few theological explanations for this disparity between the religions. One reason for the difference is that

Catholics go to Confession, whereas Protestants do not. Because Catholics confess their to a priest, they are able to have a personal conversation about their actions and receive definitive . Protestants do not have this sacramental , so Arruñada believes that they act as though their actions carry more weight than Catholics do. The higher moral standard to which Protestants hold themselves provides a drive to work more morally, not harder. A cynic

2 Becker & Woessmann (2009) 3 Arruñada (2010) Carter 6 could say that the Protestant work ethic is not much more than the opposite of Catholic cronyism, which received accidental support from the of Confession.

2. Church Teaching

The fact that religion in general influences individual economic productivity does not necessarily imply that Church intends for her teaching to affect the economy. Indeed, there is no reason to believe that the Church has anything to do with the economy except that it promotes a general belief in an afterlife among individual workers, which increases their productivity.

However, the Church believes that she can and should make an impact upon the world economy.

The Church thinks that individuals should see Catholic Social Teaching not simply as a set of religious beliefs but rather as practical applications of Church teaching that the Church hierarchy discuss amongst themselves and disseminate to the nearly 1.1 billion Catholics around the world.

When speaking at a symposium in 1985 entitled “The Church and Economy in

Responsibility for the Future of the World Economy,” Benedict, then Joseph Cardinal

Ratzinger, stated that inequality is the greatest threat to human cohesion around the world, even more so than the arms race that was escalating between the East and the West.4 As an institution that is interested primarily in saving souls, the Church believes that society should try to eliminate anything that drives people apart from each other. This does not imply that salvation can come through the market but that individuals should focus on improving life for each other in order to make salvation more plausible. In order for this to happen, the Church should interact with the economy in a way that will help guide it and provide a moral footing for it. Ratzinger believes that the market needs to have some sort of external moral authority to prevent it from seeing itself as an internal good and becoming entirely consumed with itself. Once the end goal

4 Cardinal Ratzinger (1987) Carter 7 shifts from improvement of the individual to solely the economic gain of nations, the entire point of economic development is lost.5 As such, the Church needs to behave differently than a normal firm would. Although the economy as a whole may only see the Church as a set of firms that subscribe to a certain charitable philosophy, the Church sees herself as something much more profound. The Church believes that she needs to make a moral impact on society and the economy. She also has the task of encouraging development in poorer areas of the world in order to prevent suffering from hunger, to strengthen personal bonds, and to make people less polarized against each other. Therefore, Ratzinger believes that it makes sense to look for a relationship between the Church and the economy.

Along the same line of thought, Cardinal Höffner discusses specific goals that the

Catholic Church believes are justified both economically and morally. Primarily, he makes it clear that economic development should focus on the individual. The focus comes from the

Church teaching of “solidarity,” which emphasizes the connection between people and the inherent worth of each member of society. After establishing the need for the Church to have a role in economics, Höffner gives particulars about how and why Catholics should go about their economic lives. He makes an interesting argument for free trade, stating that God gave each part of the world a different set of resources and that it is good for us to trade and interact with each other in order to enjoy the fullness of His creation.6 He also gives a list of steps that the world should take in order to improve the situation in the third world. Among these steps is expanded trade, an end to protectionism, safe workplaces, an increase in the amount of land used for farming, increased aid from developed countries to developing countries, cuts in military expenditure, and a focus on infrastructure projects over flashy, exciting projects like palaces,

5 Ibid 6 Cardinal Höffner (1987) Carter 8 skyscrapers, or stadia.7 For an organization that is often ridiculed for being antique, the Church provides rather straightforward and sound advice for developing countries.

Another speaker at the symposium, Agostino Cardinal Casaroli, argued that the Church has not only a responsibility to the individual but also a responsibility to God in dealing with economic issues. He argues that God calls individuals to take care of the earth because He gave them stewardship over it. Individuals should not be wasteful but rather caring and sensitive to the world that God bestowed upon humanity.8 He acknowledges, however, that the Church is not the organization that should be making economic policy decisions. He knows that the Church does not specialize in studying economic growth, and as such, the Church should not be the primary prescriber of economic doctrine. He does not say that the Church should be uninvolved, but that the Church should work with specialists to make sure that any plans for development take into full consideration the ethical and moral guidelines laid out by the Church.

3. Liberation Theology

The previous views all argue for or against an impact on the economy based on theological beliefs held by Catholics or Protestants. While these may explain the relationship between Catholicism and the economy, it is more plausible to believe that the Church has more impact when it is actually trying to work sociologically. An example of this comes from

Liberation Theology. At its peak in the 1970’s, Liberation Theology was one of the biggest and most influential social movements in Latin America. It emphasized caring for the the poor in a society, focused on ending unjust social structures, and called for land ownership to benefit the public as a whole, not just those lucky enough to own land. These sociological goals reflect the view that theology is not just a backward looking historical tool but rather is a living philosophy

7 Ibid 8 Cardinal Casaroli (1987) Carter 9 that applies to the present struggle of the poor against injustice in modern society.9 The Church believes that her teachings should be applicable to all lifestyles, which implies that Liberation

Theology provides a sort of political agenda for those wishing to be liberated from their poverty in Latin America.

A keystone of Liberation Theology is that it believes that it should bring about material change in the world. This puts it at odds with traditional Catholic theology, which states that the most important goal in life is working toward the Kingdom of God, not the Kingdom of Man.10

The Kingdom of God cannot come about by any means except through God. The Kingdom of

Man is not something that the Catholic Church normally deems worthy of pursuing as a theological goal. Therefore, because Liberation Theology cannot bring about the Kingdom of

God and it was not supposed to focus on bringing about of the Kingdom of Man, it found itself at odds with the upper levels of the Church hierarchy in Rome.

Liberation Theology has, as have most theological forms of thinking, a tendency to interact with sociology and economics in the wrong way. It wants to use the social toward its goals, but it tends to have a negative view of the social sciences because they tend to focus on present problems while ignoring life’s “big questions.” Theologians more often than not take care to state that there is inherent value in individuals and that they cannot become mere numbers or trends, as they think that the social scientists would like to believe.11 As such, it is understandable that Liberation Theology does not necessarily provide a perfect model for economies to follow. Land reform and the preferential option for the poor constituted the most typically communist aspects of this new theology. Land reform entailed redistributing land from

9 Dawsey (2001) 10 Schubeck (1999) 11 Ibid Carter 10 the rich to the poor in order to individuals to have ownership of the means of production (land) that they rely on for their livelihood. The preferential option for the poor meant that the Church wanted governments to focus on giving more freedom and work opportunities to the poor.

Through somewhat Marxist prescriptions, Liberation Theologians try to remedy poverty with the assumption that capitalism failed to sufficiently care for the poor in Latin America.

In order to tease out the relationship between Liberation Theology Catholics and those outside of the influence of Liberation Theology in Latin America, the period of the height of

Liberation Theology’s political influence exist clearly. The beginning of organized

Liberation Theology occurred in late 1968 at the Medellín conference. In a meeting of CELAM

(the Council of Latin American Bishops), representatives from most Latin American countries came together in order to define the Church’s stance regarding the plight of the poor. The

Medellín conference is significant because it was, according to the Medellín documents, the first time that the Church came together to decry the institutionalized violence that existed against the poor and marginalized.12 The Church knew that she had to continue to work for her people, so the documents of Medellín emphasized overturning unjust social structures and bringing about more favorable social structures for workers, especially those in poverty. During the 1970’s, the

Church in Latin America strongly promoted ideas related to social justice and welfare for the poor. It chose communist style reforms that were radically different from the capitalist actions that seemed unsuccessful. Despite the Church’s poor choice of Marxism as a political- economical structure, it was arguably better than not having a position at all. If the Church failed to make statements on the economy, she would have lost share to Protestant sects that could fill the gaps in her teachings. These disestablishmentarian actions ran contrary to the Church’s

12 CELAM (1993) Carter 11 normal modus operandi. Before the Medellín conference, the Church practiced rather conservative politics and aligned itself closely with the reigning regimes. Medellín’s focus on poverty and overturning unjust social structures naturally put it at odds with the established government. Unfortunately for Liberation Theology, the political and economic messages put the fledgling trend at odds with the Vatican as well.

The movement lost considerable steam once the papacy started speaking against

Liberation Theology’s emphasis on the Kingdom of Man and its borderline communist message.

Despite its literal and cultural distance from Rome, the Latin American Church heeded the instructions of the Vatican respectfully and thoroughly. During the mid-1970’s, the papacy began to decry Liberation Theology. Liberation Theology’s economic views put it at odds with the rest of the Church, which believed that the Kingdom of Man is not a worthy pursuit on which the

Church should focus. When the papacy spoke against Liberation Theology, the movement began its decline, as the Latin American Church desired to remain in with the teachings of the universal Catholic Church.13 Christian Democratic Parties - the political incarnations of

Liberation Theology - listened to sent by Rome and followed their suggestions. The

Church knew that it would have been unacceptable to remain silent on the issue of poverty, but she needed to change her position in order to remain friendly with Rome. If she remained silent,

Protestant groups would seize the opportunity to increase their share of the population by providing social guidance where the Catholic Church failed to provide it.14 In order to remain relevant while adhering to Catholic Social Teaching, the Latin American bishops met again in

Puebla to revise the practical teachings of Liberation Theology. They still emphasized the preferential option for the poor, but they dialed back the more radical terminology.

13 Arruñada (2010) 14 Williams (1967) Carter 12

4. Hypothesis

In existing literature, the effects of religion on the economy are highly contested. Some critics argue that religion has a negative influence, some argue positive influence, and some argue that there is no influence. Based upon existing literature, this paper’s hypothesis is that

Liberation Theology will negatively affect macroeconomic growth. This hypothesis presumes that religion is efficacious and can cause significant change at the individual level, which can lead to macroeconomic changes. Further, the hypothesis assumes that Marxism negatively influences growth. Although this last point did not appear in the literature review, it is a normal assumption among most modern economists. Finally, the hypothesis assumes that Liberation

Theology is similar enough to Marxism to assume that its effects on macroeconomic growth would be similar to Marxism’s effects.

Data The data describing historical Catholic population come from the Annuarium Statisticum

Ecclesiae (ASE), which is the statistical yearbook of the Catholic Church. The Church began publishing it in 1969 and continued every year thereafter. These books contain a plethora of information, although it is not easily accessible. For example, the Church published the 1969 edition of the yearbook – including the notes, explanations, tables, and country names – entirely in Latin. For fifteen years or so, the country names were all in Italian with limited English notation. In the more recent editions, the authors chose to publish the country names in English, along with notes and explanations in a variety of languages. This presented problems with data entry, especially as various countries changed names, ceased to exist, merged, separated, and otherwise evolved across the years. The yearly data come from information sent in by around the world. The fact that the Church collected data for herself may seem suspect, but a Carter 13 downward trend in overall Catholic share shows that the Church’s statistics are at least consistent with perceived trends. Two sets of data came from this source: total population and Catholic population in each country. The yearbooks reported statistics for Catholic share in each country, but the publishers rounded off the measurement rather inconsistently. This metric was not as accurate as a manual calculation using a combination of reported Catholic and total national populations. Further, the yearbook did not report the Catholic share in each year that it was published, so manual calculation was the only option for finding the Catholic share in each country.

The Penn World Tables provided information regarding macroeconomic factors. Key descriptive factors include real per-capita GDP growth rates, real per-capita GDP, and trade openness as measured by the ratio of exports to GDP and the ratio of net trade to GDP. The data are yearly from 1969, although the full Penn World Tables extend beyond the early bound of the

Catholic survey data. The observations trace countries from their present day names, so countries like East and West Germany are combined into one entry under the name of Germany. This created a few problems when combining the Catholic yearbooks’ data with the PWT data, but the constant base allowed for more consistent analysis, especially for estimating country-specific coefficients.

The initial calculation for the Catholic share was the ratio of the Catholic population found in the yearbooks to the population recorded in the Penn World Tables. Unfortunately, there exist a significant number of circumstances where the PWT state that there are fewer individuals in a country than the Catholic yearbooks say there are Catholics. This resulted in the

Catholic share being greater than 100% in some circumstances, which is clearly impossible.

Instead of using this flawed calculation, the Catholic share was calculated using the ratio of the Carter 14

Catholic population to the total population in each country as reported by the Church yearbooks.

This always yields a result below 100% and reflects more accurately the view that the Church has toward herself. The changes in the calculation of the Catholic share did not significantly affect most of the countries in the survey, but it caused a few major changes. Notable transformations include Ireland and countries with fewer than a million residents. Small countries were particularly prone to misrepresentation when using a combination of the PWT and the Catholic yearbooks. A difference in measurement by as few as 5,000 people could be the difference between a country being measured as 91% Catholic or 103% Catholic. The case of

Ireland is unique because of the way that the Church views the island of Ireland. The Penn World

Tables view Ireland as the country located in the southern half of the island while the Catholic yearbooks see Ireland as the entirety of the island, including North Ireland, which is a part of the

United Kingdom. Due to the fact that both regions are very Catholic, the result of using the PWT and Church yearbooks’ data together resulted in Ireland having a population that was consistently greater than 100% Catholic. The cases of small countries and Ireland both show why only using data from the ASE was the best choice.

The final data component comes from the Polity IV index. This index provides a numerical measure of a country’s government type. A higher number represents a more democratic state while a low or negative number reflects an authoritarian state with few or no signs of democracy. The index measures data yearly on a scale from -10 to 10 with -10 representing a completely authoritarian regime with no democratic elements and a rating of 10 representing a completely democratic government that is free from authoritarian influence. This study utilizes this index for all years when it is applicable. It was not available for every country Carter 15 included in the PWT and the Church yearbooks due to name changes, revolutions, secessions, or other national changes.

Every country was included in the analysis so long as there were sufficient data from each data set. This, unfortunately, means that gaps in certain data sets resulted in some countries being excluded from the analysis. The Polity Index did not have information on a few of the countries that were in both the PWT and the Catholic yearbooks, so those countries were excluded. In addition, the Polity Index usually lacked measurements during the first year of a country’s existence. This only resulted in a loss of observations if the country formed or otherwise reestablished itself during or after 1969. There also exist some countries or regions that the Church yearbooks recognize but the PWT do not due to differing regional or national definitions. These were usually smaller countries that did not have very large or globally important economies. Finally, some countries did not have observations for Catholics in the

Church yearbooks. This last condition occurred during two types of cases. The first and easier case occurred when the yearbook simply did not have a country due to novelty, revolution, or some other cause. The second and more challenging problem occurred when a country was unable to report any information. The worst offender in this area is, as often seems to be the case in international record keeping, China. Over the 38 years surveyed, the Catholic Church could never provide an estimate of how many Catholics lived in China. It is very hard to believe that there are absolutely no Catholics living in a country with over a billion people in it. India, for example, has over a billion people and has a non-negligible number of Catholics even though

Catholicism is not a cultural norm there. Surely, the number of Catholics in China should be greater than zero, so the missing values for Catholic share should remain missing instead of being changed to zero. Carter 16

The Church is usually straightforward about measuring the Catholic share, even when the number to report is zero. There are actual cases where the Church reported that there were essentially no Catholics living in a region. The clearest difference between the cases of missing values versus zero values is in Afghanistan. For the first 20 years of the survey, Afghanistan did not report any statistics about the number of baptized individuals living in that country. Within the last 15 years, that number changed to zero, then slightly less than a thousand. This reflects the difference between no observation and observing zero. Cases where the Church could not provide observations were removed from the analysis. Cases reporting zero Catholics were included in the models. Losing China, North Korea, Mongolia, and a few other countries certainly seems like it might hurt the analysis, but changing (and essentially making up) observations from missing to zero would weaken the quality of the data.

Due to the incongruous nature of the data sources, there were occasional issues that deserve mention. In Germany, the East and West were separate countries for approximately 20 of the 38 years in the survey. Because the PWT measured using constant country names, it ran into trouble when compared to the Catholic yearbooks and the Polity index, which measured the countries separately. In cases where the countries were later reunited, the populations of the different countries were simply summed to create the statistic for combined Catholic share.

When countries were separated in the Polity index, the average was taken to generate a value for the united country as measured by the Penn World Tables. This problem surfaced particularly between East and West Germany and European and Asian Russia. Thankfully, the PWT did not trace Eastern Bloc countries back into their days in the USSR; so combining the data sources for countries that emerged after the fall of the Iron Curtain did not cause excess trouble. Carter 17

There is not, unfortunately, a reliable measure of the influence of Liberation Theology throughout Latin America. The Medellín conference produced one major document, which was signed only by the in charge of the Latin American conference.15 Measuring the volume of literature produced by liberation theologians to create an index of national academic activity would require herculean effort for results that would overly represent more populated countries that could support a more diverse group of theologians. A few factors can help contribute to building a model of Liberation Theology’s influence in Latin America. These factors include conference attendance and official political presence. While records are nonexistent regarding the exact names or nationalities of the participants of the conference, it is known which countries chose not to participate by not sending their bishops to the conference in

Medellín.16 This meant that the bishops were unable to learn about the movement firsthand and influence its future. The countries that chose not to send bishops include Mexico, Uruguay, and

Colombia. Political presence used the existence of a Christian Democratic Party or some variant thereof was used to measure Liberation Theology’s influence on national politics. The existence of a Christian Democratic party in history suggests that there was at least some degree of popular support for Liberation Theology. These incarnations of the CDP leaned left politically and had a populist and usually Catholic base. The Christian Democratic Parties that existed in Latin

America were significantly different from the now more familiar party with the same name found in Germany. The German party tended to be much more conservative than the liberal CDP that developed in Latin America. The countries that were able to support a Christian Democratic

Party were Argentina, Bolivia, , Chile, Colombia, Costa Rica, Cuba, the Dominican

Republic, Ecuador, El Salvador, Guatemala, Mexico, Nicaragua, Panama, Paraguay, Peru,

15 CELAM (1995) 16 Dussel (1976) Carter 18

Uruguay, and Venezuela.17 The combination of the dummy variable for conference participation and political party presence makes up the variable describing Liberation Theology’s influence in these countries, allowing for the variable to take integer values ranging from zero to two, inclusive. This method takes into account both the political movements of Liberation Theology along with the bishops’ theological support. It does not take into account the success of the political movements or academic support for Liberation Theology. For countries outside of Latin

America, the measurement equals zero. This is not to say that Liberation Theology’s influence failed to spread beyond Latin America but that the other incarnations of Liberation Theology differ substantially from the Latin American version. Liberation Theology is a difficult idea to measure, but utilizing both political influence and theological support should provide a reasonable proxy for this elusive but important trend.

The final variable, LTXPS, is the product of the Catholic share and the Liberation

Theology measure. This variable supplements the variable for Catholic share in Latin American countries in order to find more precisely the relationship between growth, Catholicism, and

Liberation Theology. As with the measure of Liberation Theology, this variable is zero for all countries outside of Latin America. The variable is nonzero for countries under the influence of

Liberation Theology, even after that movement’s peak. This makes it possible to see whether

Liberation Theology’s influence actually changed after the Puebla conference in 1979 ,when the movement essentially ended.

Methodology All models are STATA least squares estimations using robust standard errors.

The dependent variable for each regression was the real per-capita GDP growth rate. The

17 Mainwaring & Scully (1995) Williams (1967) Carter 19 independent variables include the year, real GDP per-capita, population, openness of the country’s economy as measured by the ratio of total trade to output, openness measured by the ratio of total exports to output, the Polity IV index, and a dummy variable for each surveyed country. Including a dummy for each country used up 155 degrees of freedom, but it significantly improved both the R2 and the adjusted R2 of each of the models. Further, including a dummy for each country eliminates the need to include a dummy for each continent. This means that a very Catholic country that routinely performs poorly due to resource poverty or other external factors should not negatively affect the coefficient on Catholic share. The most important variable to this study is the Catholic share. If Catholicism influences growth, it should become apparent once the model controls for the aforementioned explanatory variables.

The first set of analyses used the previously mentioned variables to find a relationship between Catholicism and growth. Nine regressions were run in order to discover whether

Catholicism had a different impact on countries depending on time or location. Three sets of regressions were run with all of the years surveyed, three regressions were run with only the years of Liberation Theology’s height (1969-1979), and three regressions were run using the years after the height of Liberation Theology. Within each of these groups, three sets of countries were analyzed. The first included all of the countries in the survey; the second included every country except for those in Latin America (Central America and South America); and the third examined Latin America alone. If Liberation Theology changed the way that Catholics influenced growth, then there should be a difference between Catholic share coefficients during the Liberation Theology and post Liberation Theology periods in Latin America. A perceivable difference should also appear within the Liberation Theology period between Latin American and non-Latin American countries. Carter 20

The initial regressions show a positive, statistically significant relationship between

Catholicism and growth during the peak of Liberation Theology’s influence outside of Latin

America and in Latin America after the height of Liberation Theology. There is a positive, insignificant relationship after the peak outside of Latin America and a negative, insignificant relationship in Latin America during the peak of Liberation Theology.

Table 1: Influence of Catholic share on real per-capita GDP growth rates cathpct Worldwide World less Latin Latin America (se) America R2 All time periods 3.40214 5.173074 -1.459992 (3.349008) (4.468686) (2.751869) 0.0750 0.0785 0.0815 Liberation Theology 13.09088 34.32355 -.9796156 (7.838818) * (15.88843) ** (5.709867) 0.1757 0.1822 0.3714 Post Liberation Theo. 3.375472 3.14348 7.832718 (3.522364) (4.448459) (4.603827) * 0.1220 0.1230 0.1392 *, **, and *** indicate significance at 10, 5, and 1% alpha respectively.

The data seem to indicate that Liberation Theology causes Catholics to be less beneficial for growth than Catholics outside of Latin America. The idea that the 1970’s were simply an underproductive time for Latin America as a whole should be a nonissue as each of these regressions was run independently. If the 1970’s caused growth to slow in Latin America, that trend should be picked up by the country dummy variables, the coefficient on the year, and the estimated intercept in the regressions for Latin America during the peak of Liberation

Theology’s influence. The coefficient for Catholicism should not be affected by a decade long recession. Carter 21

A second set of regressions was performed to try to find a more accurate measurement of

Liberation Theology’s effect on growth. This set of regressions used the same independent and dependent control variables as the previous test and looked at the same time and geographical breakdowns. The variable LTXPS (the product of Catholic share and the Liberation Theology dummy) was added to ease out the difference between Latin American Catholics outside of the influence of Liberation Theology and Catholics who were more likely to subscribe to the political teachings of Liberation Theology.

Table 2: Influence of Catholic share and Liberation Theology-modified Catholic share on real per- capita GDP growth rates coefficient Worldwide World less Latin America (se) Latin America R2 CPCT LTXPS CPCT CPCT LTXPS All time 5.6467 -4.486845 5.684755 -5.47431 2.494375 periods (5.052382) (3.621445) (5.27901) (7.932086) (5.148258) 0.0752 0.0785 0.0816 Liberation 30.43783 -25.11366 34.32355 46.59778 -40.65978 Theology (13.85987) ** (12.28491) ** (15.88843) ** (17.94035)*** (16.07853)** 0.1780 0.1822 0.3848 Post 3.378181 .6729868 3.449697 7.614298 .119263 Liberation (5.325038) (3.337547) (5.468521) (16.15019) (8.968163) Theology 0.1220 0.1230 0.1392 *, **, and *** indicate significance at 10, 5, and 1% alpha respectively.

As before, Catholicism has a positive, statistically significant effect on the growth rate of real per-capita GDP during the peak of Liberation Theology around the world. The coefficient on the measurement for Catholic share modified by the proxy for participation in Liberation

Theology (LTXPS) was statistically significant and negative when all countries were included in the regression. This indicates that the Liberation Theology has effects that are distinguishably different from normal Catholic belief. A brief example may help demonstrate the meaning behind these coefficients. Carter 22

Table 3: Change in real per-capita GDP growth rate with the given change in Catholic share holding all else equal for all countries surveyed Worldwide 1% less Catholic 1% more Catholic No Liberation Theology -0.304% +0.304% Medellín or CDP -0.052% +0.052% Medellín and CDP +0.198% -0.198%

If a country were 1% more Catholic and not influenced by Liberation Theology, it could expect growth rates to be 0.304% higher. A country that either participated in the Medellín

Conference or supported a Christian Democratic Party and had its Catholic share rise by 1% would experience a 0.052% higher growth rate. Finally, a country that was 1% more Catholic that both participated in the Medellín Conference and supported a Christian Democratic Party would have a 0.198% lower growth rate than it had previously. This regression looks at all countries during the peak of Liberation Theology. Theoretically, Latin America’s struggles in the

1970’s could explain the perceived difference between Catholicism and Liberation Theology

Catholicism. The regression examining Latin America in particular prevents this argument from gaining ground.

If there were a negative relationship between growth and Latin America, the regression examining only Latin America should be able to determine more accurately the influence on growth that Catholicism had compared to the influence of Liberation Theology Catholicism.

Unlike the inconclusive regression that excluded the measure of Liberation Theology, the more thorough regression yields coefficients on Catholicism that are statistically significant from zero.

The results reinforce the results of the worldwide regression. Using an example similar to the one in the previous paragraph should help clarify the meaning of the coefficients.

Table 4: Change in real per-capita GDP growth rate with the given change in Catholic share holding all else equal for Latin American countries Latin America 1% less Catholic 1% more Catholic No Liberation Theology -0.466% +0.466% Medellín or CDP -0.059% +0.059% Medellín and CDP +0.347% -0.347% Carter 23

If a Latin American country were 1% more Catholic without the influence of Liberation

Theology, it would experience a 0.466% higher growth rate. A Latin American country that was

1% more Catholic would have a 0.347% lower growth rate if it had both participated in the

Medellín Conference and supported a Christian Democratic Party. This rather clearly explains why the earlier model, which only included Catholic share, was unable to find any significant correlation between Catholicism and growth in Latin America. The influence of Catholicism varies wildly depending on the influence of Liberation Theology in each particular country, which fits into the original hypothesis. It also makes sense for the coefficient on Liberation

Theology-influenced Catholic share to be statistically insignificant from zero after the period of

Liberation Theology. Because it is not significant, the LTXPS variable can be removed, which yields a positive and statistically significant coefficient for the Catholic share after the peak of

Liberation Theology (see Table 1).

There are, of course, some difficulties presented by this model. The first is that the effect of Catholic share does not seem to consistently affect growth worldwide in the period after

Liberation Theology. The correlation is positive, but not statistically significant, when both including and excluding the modified Catholic share. This could suggest that the influence of

Catholicism is dependent on some other historical accident. It could also suggest that religion’s influence is dependent on the historical period. Religious fervor waxes and wanes, so religious impact upon the economy could depend on this fervor rather than the size of the religious base.

Another point of contention in this paper is that there are significant gaps in the data. In particular, the case of China causes non-negligible amounts of concern. Although the BBC reported that there were nearly 13 million Catholics in China in 2006, these Catholics are not all Carter 24 loyal to the Pope.18 5 million of those Chinese Catholics practice a state-sponsored religion that ignores the influence of the Vatican hierarchy. An estimated 8 million Chinese citizens practice

Catholicism illegally underground. Because these types of Catholicism are not quite the same as

Catholicism in the rest of the world, and because the Church cannot estimate the number of practicing Chinese Catholics very accurately, China would not be a suitable country to include in the study. Its Catholics are different enough that including them in the analysis would yield results that are inconsistent with the rest of the world. Further, China’s inclusion would not change the difference between Liberation Theology Catholics and non-Liberation Theology

Catholics within Latin America. Excluding a country that experienced dynamic growth in the last few decades is certainly not an ideal situation, but it is better than the alternative of including inaccurate data that is not indicative of the general trend around the world.

Analysis The data seem to suggest that Catholicism is a generally positive force for economic growth in the world except when it is under the influence of Liberation Theology. This implies a number of important consequences and opens up a wide range of possibilities for future research in the area of the economics of religion.

The first important implication from these data is that large scale religious movements can cause macroeconomic change. As mentioned in the literature review, existing works suggest that religion can have a significant impact on the economy. Most of these studies examine these effects on a microeconomic level and tend to look at the way that belief impacts individual productivity. This analysis, however, suggests that religious belief on a nationwide scale can make a significant impact on macroeconomic growth. Religion is one of the biggest driving

18 BBC (2006) Carter 25 factors behind many peoples’ lives, so it makes sense for it to influence their everyday activities, including financial and other economic matters. Beyond the implication that religion is efficacious is the idea that Catholicism in particular benefits the economy. Despite claiming that nobody can serve both God and Mammon, the Church has some practical tips for how to do so. 19 In 1891, the Church published Rerum Novarum, an written to address modern concerns regarding work and labor. Since then, the penned a number of encyclicals in the spirit of Rerum Novarum in order to keep up with the rapidly changing economic world. These encyclicals range in topic from the dangers of communism to the pitfalls of uninhibited, unrestrained, and unregulated capitalism. The Church does not endorse any particular economic system as to others. Instead, it focuses on the spiritual value of work and the importance of treating individual workers with respect, dignity, and sympathy. It decries soulless, tedious jobs that take away from laborers’ creativity and stifle the spiritual value of their work. It mandates ethical business practices along with fair and equitable treatment of workers. These suggestions all fit into modern economic theory as conditions that benefit sustainable long-term macroeconomic growth.

As stated in the literature review, the Church believes that she has some level of economic and political authority. Although the Church’s statements are qualitative in nature, the analysis above suggests that there is some quantitative truth behind the Church’s teachings. The

Church believes herself to be a moving force in the world and it seems that she measurably effects worldwide growth. It would be interesting to see if the global economy responds to publications by the Vatican that suggest ideas with economic effects without the political mobilization of Liberation Theology. One could argue that people in Africa follow the Church’s

19 Matthew 6:24. Carter 26 teaching on condom use to the detriment of both the economy and public safety. The Church must be aware that her statements are efficacious and can cause incredible amounts of change around the world.

Another important implication of this study is that it questions the concept of the

“Protestant work ethic.” Although there was no data on Protestantism included in the regressions, the positive influence of Catholicism suggests religion can influence the economy beyond the sphere of . The data from this analysis neither confirm nor deny the hypothesis put forth by Becker and Woessmann that growth was caused by education and not

Protestantism. Because this study does not include educational information, the possibility exists that Catholic share impacts growth only because it causes changes in education or other unmeasured factors. However, there is still reason to believe that the correlation is not spurious.

In a separate regression, Catholicism was positively correlated with the Polity IV index. This implies that something can have both an effect on Catholicism and on growth. In the case of

Liberation Theology in Latin America, an increase in the polity index lead to an increase in growth. It also causes an increase in Catholicism, which contributes negatively to growth.

Regardless of how other variables influence growth and Catholicism, Liberation Theology

Catholicism seems to hurt growth rates.

This essay opens up the potential for a number of future studies. One potential avenue for further research lies in strengthening the model in order to eliminate the chance of random correlation between Catholicism and growth. This could be accomplished through adding in additional variables for education, religious freedom, and government intervention in both the economic and religious spheres. If there were a relationship between Catholicism and growth, it would be strengthened or clarified by removing the variance caused by other variables. If there is Carter 27 not a relationship, inclusion of additional variables should reduce the likelihood of the coefficient on Catholic share being statistically significant. Further, it may be interesting to do a time series analysis to see if Catholic share leads growth or if it follows changes in growth. If Catholicism really leads growth, then spikes in the Catholic share should lead spikes in GDP growth.

In addition to strengthening the model through a better use of control variables, the model could improve with a better proxy for Liberation Theology. Christian Democratic Parties contained many of the teachings of Liberation Theology, but the Church did not officially control them. Further, the existence of a CDP means that there was some level of support, but this paper ignores the popularity of these movements. Election records exist which could create a better proxy for the political strength of Liberation Theology. Another possible measure of

Liberation Theology comes from the religious side of this movement. Looking at the concentration and activity of Base Ecclesial Communities, one of the key communal building blocks suggested by Liberation Theology, could provide a measure of the grassroots support of the movement. It might also be interesting to examine the relationship between Liberation

Theology, Catholicism, and other socialist movements. This could be accomplished by comparing election records to Catholic share during the years from 1969-1979.

Conclusion Liberation Theology’s radical political views make it a useful tool for examining the influence of Catholicism on macroeconomic growth around the world, particularly in Latin

America where the movement had its greatest impact. Showing that Catholicism can affect macroeconomic growth is an important step for the development of the field of economics of religion. If Catholicism can cause growth, then perhaps other religious trends could influence the economy at a macro level. It would be particularly interesting to see a worldwide study to find Carter 28 whether or not the Protestant work ethic actually exists, especially now that there is some evidence that Catholicism in general is correlated with growth. Carter 29

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